If you have ever done an investor pitch to a crowd of hoped-for investors, or to an angel investment group, you have probably felt a lot like you were in a bar trying to meet potential dating partners.
Your goal when you do an investor pitch is much like meeting people in a bar: You are trying to meet a person who IS a potential dating partner and is interested in a follow-up meeting.
Who is a “potential dating partner”? In the early stage investment world, “potential dating partner” means:
- They have money that could potentially be invested under your basic approach – equity, length of time, structure
- They are looking for and WANT to make investments in companies at your stage of development
- They have the mental and emotional capability of being an early stage investor: they are mentally and emotionally prepared to let their money ride for 5 years at least without making your life miserable and they will not be significantly affected by a total loss of their investment if things don’t go as hoped.
- They have the funds to invest in at least one additional round in your company.
This makes the investor pitch a great deal more difficult than the bar interaction. In a bar, if you are able to strike up a conversation with someone and they aren’t wearing a wedding ring, then the chances are probably better than 50-50 that they may be open at least to conversing with someone. And if they are already in a satisfactory relationship, they are either already there with someone (and it’s obvious) or they wouldn’t be there at all.
But with the traditional investor pitch, you really don’t know that information. People go to investor pitches for MANY different reasons that don’t put them in the investment “potential dating partner” category. Here are a few of the most common:
- They are trying to learn about angel investing and how it works, but are not really ready to invest – they have more to learn and need to get comfortable.
- They are trying to meet companies in which they might invest at LATER stages (cultivating their deal flow)
- They are thinking in terms of investing only a small amount of capital relative to your round.
- They like the social/networking aspect of being in the angel group.
- They are a fund that will soon be trying to raise another round of funding, and want to fill their deal flow for when they raise their fund.
- They are looking for money themselves, but are attending sort of “in disguise.”
- They are a service provider that is looking for companies that can become clients. (Some of these really might be fine, because they sometimes will offer services as an investment proposition, and you may need them.)
So what if you’re planning a visit to an investment “bar” and there is a possibility that ALL of the patrons are “married” – meaning NONE of them is a potential dating partner, not just for you but for anybody at an early stage?
- Do some recon about the group and see whether it really is an investor singles bar or whether everyone there is likely to be married. Have a discussion with the group organizer and find out as much as possible about the group in advance? How many deals did they do in the 12 months? In what industries? At what size and stage of round? What sort of companies did they actually fund? And you are looking for their actual deal funding experience, what has actually been funded – NOT what deals have they looked at but not funded. Remember, you are looking for actual deal funding behavior, not just what the group says it is there to fund.
- If you discover that your pitched group has no or very few PDP’s, then by all means consider NOT pitching to the group. In fundraising, there are three important assets that you should conserve as much as possible:
- Time – As an entrepreneur, you’re always going to be balancing between spending your time to move your business forward versus raising money. They’re related of course, and sometimes in a chicken-and-egg kind of way. But no matter what, you can’t spend time doing non-productive money pitches if everyone’s married.
- Energy – It takes emotional energy to do a pitch of any kind, even a practice round. Don’t expend that energy on non-productive meet and greets.
- Self-Confidence – This is the biggest killer of pitching to investors that aren’t really potential funding partners: You can leave the room and feel like you did a great job, only to find that no one wants to meet, or worse yet, they want to meet but not to invest.
- If you DO pitch the group, then consider it “practice.” Accept some but not all feedback from “married” investors. And don’t be afraid to ask married investors if they DO know any potential dating partners or “singles” groups.
- If you discover that all of the investors present are “married”, then you should definitely chalk it up to “it’s not about you, it’s about them.” Do NOT make major revisions to your business plan, do NOT completely revamp your pitch, do NOT substantially revise your offer. None of this would have mattered because everyone is married. Protect your confidence.
There’s one more wrinkle and it’s a tough one. Be open to taking a good hard look at your business attractiveness. Frankly, sometimes investors say they’re “married” as an excuse because they don’t like your deal. This is completely impossible for you to figure out without a great deal more inside information about the people involved, so rather than worrying about it, just be open to considering whether your investment proposition is attractive. This is different than simply developing a better pitch, it’s a real look at your prospects.
I hope this has been helpful. Now, could I ask you a favor? Please help me help you. Leave a comment below and answer this question:
The best way I’ve found to discover whether a particular investor is “real” is …
I’m looking forward to reading your comments.
We’ll talk soon.